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September 16, 2007

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Victor Cook, Jr., New Orleans, Louisiana

Jonathan,

Thanks once again for your prompt comment on (and kind words about) this post. I did overlook the "House of Brands" issue. Not because I hadn't thought about it, but because Interbrand methodology published in Business Week says that P&G (and similar companies) were excluded for this very reason. Here's what they say in the BW article:

"Interbrand only ranks the strength of individual brand names, not portfolios of brands, which is why Procter & Gamble (PG ) doesn't show up."

Now, this is no excuse for overlooking the issue, it simply led me to ignore it! Also, the Johnson & Johnson logo appears prominently in all their branded ads. Both in TV and in print the corner of the page rolls open to reveal the JNJ logo and the tag line "A Family Company."

Also notice that Unilever and General Motors no longer appear on the list, but Colgate and VW do. For that matter Coca-Cola has over 200 "individual brands" in its portfolio of beverages. I guess Interbrand's claim to ranking "individual brand names, not portfolios of brands" is open to interpretation. In any event, removing JNJ and KFT from the set won't change the underlying dynamic. Brand value as a percent of market cap drops systematically with company size.

To me, an even more important issue is capturing the impact of the other six forces affecting intangible market value. This is were the biggest gap seems to be, regardless of company size or market volatility. And certainly it is the least explored in marketing, because it requires that we embrace an entirely new perspective on the role of "marketing" in the organization. An "enterprise marketing" perspective. Do you have any thoughts on this issue?

~V

Jonathan Knowles

Another really impressive piece of analysis! Thank you for taking my earlier comments on board and for generating this new perpsective so swiftly.
I have one comment to add that may help explain some of your conundrum over the disparate percentage of market capitalization that brand represents for Tiffany (75%) and J&J (2%) - namely that J&J is a multi-brand company whereas Tiffany is a mono-brand company. Your analysis therefore compares the Interbrand value of the J&J brand to the value of its entire portfolio (which includes Band-Aid, Listerine, Neutrogena and Tylenol - plus a vast range of Rx drugs). For it to be an apples-to-apples comparison with Tiffany (which only does business under one brand), we would need to sum the values of all the individual J&J brands and compare that number to the $191 billion number.
This same observation applies to Kraft, P&G, Unilever, Colgate Palmolive and other companies that have a "house of brands" strategy as opposed to a "branded house" strategy. "House of brands" is the dominant model in consumer packaged goods and for certain automotive companies (GM and VW for example).
When this correction is made (and I do not suggest you attempt it as the CPG comapnies have literally hundreds of brands!), my hunch is you would find that the proportion of brand value is close to the level observed for the monobrand companies in consumer industries (such as Disney or McDonalds)

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